New Mexico’s Multifamily Market Heats Up

by Jeff Shaw

Companies, Investors Court New Mexico’s Multifamily

By Todd Clarke, CEO, NM Apartment Advisors

Strong employment and changing post-pandemic lifestyles have led to a surge of demand for New Mexico’s multifamily rental market.  Investments made more than a decade ago are paying off from SpacePort NM and the NM Rail Runner, as well as the film and television industries, which have made New Mexico the third best place to film in the country behind Los Angeles and New York.

Although Santa Fe — the fifth best international destination and oldest state capital — remains undeserved by more than 6,484 units, the market is on track to deliver 1,500-plus units. This is well ahead of Albuquerque’s less than 1,000 new units.

More development will hopefully continue, thanks to a new Integrated Dynamic Ordinance (IDO, or zoning), recent investments in mass transit expansion lines and a vibrant tech eco-system at the Innovation District in downtown Albuquerque.

Several major employers have announced expansions in the market, including Intel (750 jobs), Netflix (3,000 jobs), Facebook/Meta (35 IT jobs, 1,500 construction jobs) and Amazon (four distribution facilities totaling more than 3,500 new jobs). Based on historic benchmarks, this creates an acute housing shortage in Albuquerque. Recent estimates indicate the market will need to add an additional 14,527 multifamily units to the current supply of 91,148 units. It also needs to increase the development of single-family ownership residences by 25,630 more units.

Until then, the market remains strong with 18.5 percent year-over-year rent growth. For those who choose to rent, that lifestyle experience has had a 24.4 percent rent growth, per Yardi’s fourth-quarter 2021 report.  Single family continues to appreciate at the rate of 2 percent to 3 percent per month. This has encouraged many owner-occupants to acquire fourplexes, which have experienced 31 percent annual appreciation.

From an investor’s standpoint, in our 33 years of marketing apartment investments, this is the first time I can tell a buyer and seller it’s the best time to conduct a transaction. From a seller’s perspective, you will make a profit whether you bought 14 years or 14 months ago. From a buyer’s perspective, now is the time to lock in long-term, historically low interest rates and scoop up double-digit rent growth for many years to come.

Apartment Demand Remains Strong

By Walt Arnold, Managing Broker, SVN / Walt Arnold Commercial Brokerage

The apartment market in New Mexico is very strong due to the demand for multifamily housing throughout the state. In metro Albuquerque, construction of several large luxury complexes continues to expand, with Albuquerque’s rental occupancy rate sitting at 95.8 percent, per a February 2022 Yardi Matrix report.

While the real estate market temporarily paused in early 2020 due to the onset of the pandemic, it quickly transitioned into a strong rental market. One factor fueling such a strong multifamily market is prospective homebuyers being pushed out of the housing market due to the significant increase in the cost of housing throughout New Mexico. This is due to the single-family home market shortage, increased pricing in construction, delays for delivery and the unprecedented demand. In fact, the multifamily housing market has never been stronger. Titan Development, one of the Southwest’s largest and most active real estate development and investment firms, has 1,000 units under construction in the Albuquerque area. Look for developers to continue to seek out sites for multifamily housing over the next several years.

Santa Fe, the capital of New Mexico, is also experiencing significant growth in the multifamily market. The Santa Fe Association of Realtors recently reported that 37.8 percent of people who work in Santa Fe commute from other cities in New Mexico, including Albuquerque, Rio Rancho and Espanola, because of the significant housing cost in Santa Fe. Today, $850 a month for rent is considered low income in the Santa Fe market, yet this rate remains a high price for most of the workers in Santa Fe. This is especially true when you consider the average cost of rent is $1,400 to $1,600 a month, with new apartments starting at $1,700 per month.

In southern New Mexico, Las Cruces — home to New Mexico State University — has built-in rental market due to the student population and faculty during the school year. The tenant population for Las Cruces is 38 percent of the Las Cruces population, with rents averaging $692 per month. Las Cruces has an average occupancy rate of 94 percent with projects currently under construction.

The state has also experienced major job growth as large national companies like Amazon, Facebook and Netflix continue to expand to New Mexico. The cost of multifamily housing will continue to increase as well, and there will be high demand for apartment dwellers and multifamily investors for the foreseeable future. With all that said, the future remains strong for New Mexico’s multifamily market.

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